The hemp-derived CBD market is growing rapidly, although many CPG brands and retailers are waiting for clarity from the FDA on the regulatory path forward for cannabidiol before piling in, but what will distinguish the winners from the losers in this space? FoodNavigator-USA headed to the BevNET/Nosh Cannabis Forum in Santa Monica to find out.
Eric Schnell, co-founder of new cannabis brand mood33, has recently launched a new line of functional beverages infused with a full spectrum hemp extract (MSRP $5.99). The 6% juice products, which do not reference CBD on pack (although the 33mg on the front of the label refers to the cannabidiol content), also contain functional ingredients such as reishi mushroom extract.
Schnell is targeting ‘friendly’ states that have explicitly authorized the sale of hemp-derived CBD products in the initial roll-out phase, has conducted extensive testing to ensure statements on-pack correlated with what’s inside, and makes no claims about the hemp extract.
While Schnell contends that the FDA’s position on CBD (that it was first investigated as a drug so can’t be added to foods and supplements) doesn’t apply to mood33, as it uses a full-spectrum hemp extract, not isolated CBD, he said he was aware of the recent wave of lawsuits, which he described as “frivolous and opportunistic.”
Dealing with such litigation will have to be factored in as a “cost of doing business” in the nascent industry until the FDA provides more clarity about the regulatory path forward, he added.
Mood33 has secured approvals for 6,000 stores for 2020 and hope to be in 20,000 stores from CVS and Kroger to Fresh Thyme by the end of 2021, said Schnell, who acknowledged that many larger retailers are waiting until there is clarity from the FDA before pulling the trigger.
Beverages under the Zola and Caliva brands featuring hemp-derived CBD will hit the US market shortly, said Zola founder Chris Cuvelier, who recently took the helm at a new beverage division at Caliva after the San Jose-based cannabis company acquired Zola from investment group KarpReilly.
Cuvelier added: "I don't think just any beverage brand can go into CBD, but Zola is already a plant-based brand, and our approach is to build high quality and great-tasting beverages that can stand on their own, and then infuse them with hemp-derived CBD. We want to be the most trusted name in cannabis, which is one of the most exciting ingredients in CPG in 10-20 years. But it's not for the faint of heart."
Ricardo Baca, CEO at PR and marketing firm Grasslands, said the cannabis industry is rapidly evolving: "The hippies and the freaks are being pushed out of the industry and more suits are coming in." He added: "We're seeing CBD explode in a way that's uncontrollable and unpredictable, but we are devastatingly behind in research in every part of this field."
"We're never going to see another opportunity like this in our lifetimes," said Michael Blue at private equity firm Privateer Holdings, which is building a portfolio of cannabis brands. "But brands really matter in this market because they eliminate confusion about legal and illegal sources of cannabis and allow professional companies to separate themselves from less scrupulous competitors."
THC and CBD are just the tip of the iceberg when it comes to cannabinoids with potential, said Blue, with CBN, CBG, CBC, CBDV all showing promise. THCV is also interesting as a potential appetite suppressant, he added.
Right now, many consumers are not clear about the distinctions between marijuana (cannabis plants that contain >0.3% of the psychoactive cannabinoid THC); hemp-derived CBD (from cannabis plants classified as 'industrial hemp' with <0.3% THC); and hemp seeds (which have no THC or CBD); with many assuming that anything with ‘hemp’ on the label will get you high, said Casey Harshman, a designer that has worked with several brands in the space.
As for building brands around CBD, some players have done a far better job than others, said Harshman, who notes that just because you can create a CBD line extension doesn't mean that you should, or that it makes sense for your brand. "People don't just buy what you do, they buy into why you do it..."
While buyers are starting to ask the right questions about post-harvest storage, heavy metals, pesticide residues, CBD and THC content, mold, and other issues when sourcing hemp extracts, there is still a long way to go, said Jill Ellsworth at Willow Industries, which provides ozone-based technology for post-harvest microbial decontamination. "We're seeing huge contamination issues in the hemp industry."
Speaking to us after the forum, Jackie Bowen at The Clean Label Project, which tested 208 of the top-selling CBD products based on IRI/Nielsen data earlier this year, said more than 30% of the top 10 CBD products contained more than 20% plus or minus the levels of cannabidiol stated on pack.
Looking at the larger sample of 208 products, around a third had less than 80% of the CBD level claimed on pack, with around 10% having less than 20% of the CBD stated on pack, with some products containing no detectible CBD at all, and some containing significantly more than the level claimed on pack (in one case, more than 700% of the declared value).
Around 45% of the 208 hemp-derived CBD products tested contained measurable levels of the psychoactive cannabinoid THC, with well over a third containing more than 0.3% and around 7% containing more than 20mg/serving, said Bowen, who noted that while the threshold distinguishing marijuana from industrial hemp is 0.3% THC in dry matter, there is no legal threshold saying how much THC is acceptable in finished products containing hemp-derived CBD.
"One product contained 85mg THC, which is higher than the limited for recreational marijuana in Oregon."
So is there a notable difference between the taste/flavor of broad/full spectrum hemp extracts, which contain a range of other cannabinoids and terpenes compared with pure CBD isolate? Yes, said Shari Mahon at Sweegen, which makes stevia sweeteners. “The broad/full spectrum extracts exhibit some earthy, bitter, and green pungent or piney notes, whereas pure CBD isolate has a much cleaner flavor profile but still contributes bitterness.”
The off-tastes can come from both the CBD itself and the carrier or solvent systems manufacturers use to solubilize the CBD, added Mahon at Sweegen: “That is a key challenge when working with CBD. For tinctures and beverages, the ideal CBD concentrate needs to be water soluble and provide no color or cloudiness when added to the product.
"There are several companies who have great water-soluble CBD concentrates that provide clear, colorless and tasteless products on the market. However, they still have the bitterness from the CBD and the solvent systems that we need to address.”
Ojai Energetics encapsulates full spectrum hemp oil in 'nanobubbles' of water so that it is "instantly absorbed upon contact with the mouth," allowing most people to feel the benefits in 30 seconds rather than 30 minutes, claims the company, which claims to offer the "fastest acting, safest, and most bioavailable CBD on the market."
Ojai Energetics founder Will Kleidon noted that some formulators have struggled with stability over the full shelf-life of a CBD product, with inconsistent onset times and bioavailability if the CBD oil/water emulsion breaks down. SoRSE Technology founder Hilary Brown also noted that adding more than 40mg of CBD to a 350ml bottle can create major sensory issues.
